Since everyone is talking about the Affordable Care Act... why not learn what it offers and how it's paid for

Tuesday

Mar 27, 2012 at 12:01 AMMar 27, 2012 at 12:16 PM

Jo Ciavaglia @JoCiavaglia

Seems like everyone is talking about health care reform again now that the U.S. Supreme Court is weighing in on the law's constitutionality -- and as I fully expect to see some old myths and half-truths resurrected, I thought it would be worth pulling this off of my hard drive to remind people exactly what the law provides now and who it taxes and when.

If you see something I missed, let me know. I'll add it -- after I confirm it's in the law, of course.

EFFECTIVE NOW

Insurers are required to reveal details about administrative and executive expenditures.

Insurers are required to implement an appeals process for coverage determination and claims on all new plans.

Enhanced methods of fraud detection are implemented.

Indoor tanning salons are subject to a 10 percent service tax.

Non-profit Blue Cross insurers are required to maintain a loss ratio (money spent on procedures over money incoming) of 85 percent or higher to take advantage of IRS tax benefits.

Companies which provide early retiree benefits for individuals aged 55-64 are eligible to participate in a temporary program which reduces premium costs. The retiree reinsurance program under health care reform that went into effect June 1, 2010 and it expires goes into effect June 1, 2010 on Jan. 1, 2014, or until the $5 billion in funding allocated to the program is exhausted.

A new website installed by the Secretary of Health and Human Services will provide consumer insurance information for individuals and small businesses in all states. www.healthcare.gov

A temporary credit program is established to encourage private investment in new therapies for disease treatment and prevention.

Employers must disclose the value of the benefits they provided beginning in 2011 for each employee's health insurance coverage on the employees' annual Form W-2's.

Insurers will be required to spend 85 percent of large-group and 80 percent of small-group and individual plan premiums (with certain adjustments) on health care or to improve health-care quality, or return the difference to the customer as a rebate. The requirement is effective starting in August 2012.

The Centers for Medicare and Medicaid Services is responsible for developing the Center for Medicare and Medicaid Innovation and overseeing the testing of innovative payment and delivery models.

Flexible spending accounts, healthcare reimbursement arrangements and health savings accounts cannot be used to pay for over the counter drugs, purchased without a prescription, except for insulin.

Increase the tax from 10 to 20 percent for non-medical early withdrawals from a health savings account for those under the age of 65.

Medicare beneficiaries will receive a 50 percent discounts on the cost of covered brand-name prescription drugs for beneficiaries in the Medicare Part D coverage gap, or doughnut hole. Additional discounts will be phased in for brand name and generic drugs and the doughnut hole will be eliminated by 2020.

Companies will be required to issue 1099 forms to any vendor of services or rental property to which the business has paid more than $600. Form 1099 is also sent to the IRS. (Under the existing law, businesses issued the Form 1099 only to individuals who provided services or property to a business.)

The healthcare law included the same form be issued to corporations as well, and that the form be issued to individuals and corporations that provide property to the business. Only business related payments are reportable, personal payments not. There are a number of exceptions, for example: payments for merchandise, telephone, freight, storage, payments of rent to real estate agents are exempted. The health care bill mandate aims to collect lost revenue from companies that under-report on their tax returns. The provision is expected to raise $17 billion over 10 years. The amendments made by this section of the bill (Sect. 9006) shall apply to payments made after December 31, 2011.

Effective by January 1, 2013

New taxes, fees, revenues:

A new 0.9 percent Medicare payroll tax on individuals who are self-employed and employees earning more than $200,000, or $250,000 for joint filers. Currently the Medicare payroll tax is 2.9 percent of all earned wages - with workers and employers each paying 1.45 percent. As an example, an individual who makes $190,000 a year in wages and $30,000 a year in investments would not have to pay the tax. The Medicare contribution would still have to be paid on modified income in excess of $200,000.

A new 3.8 percent contribution to income generated from interest, dividends, capital gains, annuities, royalties and rents for individuals who earn more than $200,000 or couples who make more than $250,000. The tax would not apply to distributions from retirement plans. Any investment income that had previously been characterized as "tax exempt" would not be subject to the new tax. The tax would apply to either investment income or the amount that your modified adjusted gross income exceeds the high-income threshold, whichever is less.

$1 tax per participant on insured and self-insured health plans for funding comparative effectiveness research. In 2014 the tax increases to $2 per participant and can increase after based on a specific formula. Insurers pay the fee for insured plans.

Increase from 7.5 percent to 10 percent the floor on itemized deductions for medical expenses, but taxpayers age 65 and over are exempt from the cutback through 2016.

Impose a cap of $2,500 on Flexible Spending Arrangements, which are now unlimited; the cap is indexed for inflation.

Effective by January 1, 2014

Members of Congress and their staff will only be offered health care plans through the exchange or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use).

Insurers are prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions.

Insurers are prohibited from establishing annual spending caps.

Expand Medicaid eligibility; individuals with income up to 133 percent of the poverty line qualify for coverage, including adults without dependent children.

Employed individuals who pay more than 9.5 percent of their income on health insurance premiums will be permitted to purchase insurance policies from a state-controlled health insurance exchange.

Establish state health insurance exchanges, and subsidization of insurance premiums for individuals with income up to 400 percent of the poverty line, as well as single adults.

Two years of tax credits will be offered to qualified small businesses. In order to receive the full benefit of a 50 percent premium subsidy, the small business must have an average payroll per full time equivalent employee, excluding the owner of the business, of less than $25,000 and have fewer than 11 full time equivalent employees The subsidy is reduced by 6.7 percent per additional employee and 4 percent per additional $1,000 of average compensation. A 16 fulltime equivalent firm with a $35,000 average salary would be entitled to a 10 percent premium subsidy.

Set a maximum of $2,000 annual deductible for a plan covering an individual or $4,000 annual deductible for any other plan. These limits can be increased under rules set in Section 1302 of the law.

Chain restaurants and food vendors with 20 or more locations are required to display the caloric content of their foods on menus, drive-through menus, and vending machines. Additional information, such as saturated fat, carbohydrate, and sodium content, must also be made available upon request.

New taxes, fees and revenues that take effect:

Impose an annual penalty of $95, or up to 1 percent of income, whichever is greater, on individuals who do not obtain health insurance; this will rise to $695, or 2.5 percent of income, by 2016. This is an individual limit; families have a limit of $2,085. Exemptions to the fine in cases of financial hardship or religious beliefs are permitted.

Impose a $2,000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill).

A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue.

Most medical devices become subject to a 2.3 percent excise tax collected at the time of purchase.

Health insurance companies become subject to a new excise tax based on their market share; the rate gradually raises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue.

The qualifying medical expenses deduction for Schedule A tax filings increases from 7.5 percent to 10 percent of earned income.

Effective by January 1, 2017

A state may apply to the Secretary of Health & Human Services for a waiver of certain sections in the law, with respect to that state, such as the individual mandate, provided that the state develops a detailed alternative that "will provide coverage that is at least as comprehensive" and "at least as affordable" for "at least a comparable number of its residents" as the waived provisions. The decision of whether to grant this waiver is up to the Secretary (who must annually report to Congress on the waiver process) after a public comment period.

A new 40 percent excise tax on high cost ("Cadillac") insurance plans is introduced. The tax is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (individual coverage), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation; employers with higher costs on account of the age or gender demographics of their employees may value their coverage using the age and gender demographics of a national risk pool

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